Hon’ble High Court held that the activities of a permanent establishment are liable to be independently evaluated and ascertained in the light of the plain language in which article 7 stands couched. The fact that a permanent establishment is conceived to be an independent taxable entity cannot possibly be doubted or questioned. Bearing in mind the well-established rule of source which applies and informs the underlying theory of taxation, we find ourselves unable to countenance the submission of the source State being deprived of its right to tax a permanent establishment or that right being dependent upon the overall and global financials of an entity.
Hyatt International Southwest Asia Ltd. v. Addl. DIT(2024) 166 taxmann.com 466 / (2025) 472 ITR 53 [FB] (Delhi) (HC)
S. 9(1)(i): Income deemed to accrue or arise in India-Business connection-Scope of total income-Taxation of income from permanent establishment-Effect of article 7 of India-United Arab Emirates Double Taxation Avoidance Agreement-Global income or profit irrelevant and not determinative-Article 7 does not expand its gaze or reach to overall operations or profitability of transnational enterprise-Activities of permanent establishment liable to be independently evaluated and ascertained-Article 7 does not restrict right of source State to allocate or attribute income to permanent establishment based on global income earned or loss incurred by cross border entity-DTAA-India-United Arab Emirates [S. 5, Art. 7]
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